Technical View: Nifty forms bullish candle, rebounds 188 pts; critical hurdle seen at 10,435

October 31
18:28 2018

Bulls were back on Dalal Street on Wednesday as the Nifty after consolidation gained strength in late morning deals and extended rally to move near 10,400 levels, backed by buying in technology, banking & financials and FMCG stocks. Strong global cues also lifted market sentiment.

The index formed a bullish candle on daily scale and almost recovered all the losses made in the previous week.

If the index decisively closes above 10,400 levels in coming session then the rally may extend towards 10,700 levels, experts said.

The Nifty after opening marginally higher at 10,209.55 immediately dropped to hit an intraday low of 10,105.10, but managed to recover nearly 300 points from that low and headed towards 10,400 zone. It surpassed immediate hurdle of 10,280 zones to hit a day’s high of 10,396 and closed with the decent gains of 188.20 points at 10,386.60.

“Nifty50 defended, despite negative news flows in the early part of the session, its critical support present around 10,100 levels before signing off the day with a strong bullish candle as it clocked in a gain of around 2 percent,” Mazhar Mohammad, Chief Strategist – Technical Research & Trading Advisory, told Moneycontrol.

He said as the index is nearing the critical hurdle of 10,435 levels it looks prudent on the part of the traders to book profits around the said resistance point as further strength in the index will derived only on a close above 10,450 levels. “In such a scenario a higher target between 10,710–10,840 can be expected.

“Wednesday’s low of 10,105 shall remain as a sacrosanct support below which recent lows of 10,000 shall come under threat,” he said.

India VIX fell down by 2.81 percent to 19.92 levels.

“During the day VIX made a seven-month high of 22.82 and fell down sharply which could support the broader market but overall comparative higher volatility could continue to attract wider market swing,” Chandan Taparia, Associate Vice President | Analyst-Derivatives at Motilal Oswal Financial Services told Moneycontrol.

He said VIX has to go down below 17-16 zones to confirm the short term reversal and a decent bounce back after the sharp cut of last two months.

On option front, maximum Put open interest (OI) was at 10,000 followed by 10,200 strikes while maximum Call OI was seen at 10,700 followed by 11,000 strikes. Put writing was seen at 10,200 followed by 10,300 strike while minor Call unwinding was seen at immediate strikes. Option band signifies a higher shift in trading band with immediate range of 10,200 to 10,600 zones.

“Recently the index has taken support near to psychological 10,000 zones and seen a multiple positive divergences with Mechanical indicators as it is turning from its deep oversold territory which is giving a confirmation for a short term bottom formation,” Taparia said.

He further said now it has to continue to hold above 10,280 zone to extend its upmove towards 10,440-10,480 then 10,650 levels while on the downside multiple supports are seen at 10,250 then 10,180 levels.

Bank Nifty managed to respect its crucial support zone of 24,500 mark and extended it gains towards 25,200 levels. The index closed 345.50 points higher at 25,153.25 and formed a bullish candle on daily scale.

Now it has to hold above 25,000 zones to move up towards its crucial hurdle of 25,500 and 25,650 levels while on the downside major support is seen at 24,750 then 24,500 zones, Taparia said.

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